5 Things to Do to Prepare to Apply for a Business Loan

5 Things to Do to Prepare to Apply for a Business Loan

Unsecured business loans

Starting up a new business can be a very exciting venture. All the ideas are fresh with great potential. Maybe you have already written out your business plan and financial plan and risk assessment and are excited to get moving. Well, hopefully this article will help you understand the next step: small business loans!

  1. The following is general information that will help you from the beginning to start right:

    1. Be prepared and honest and truthful right from the start. Institutions are familiar with being scammed and know what to look for.
    2. Research different financial institutions and find out what kind would be best for your type of business.
    3. The best place to start is somewhere you already have good reputation like your own personal bank.
    4. Don’t forget to look into credit unions and local banks, not just the big high flying ones.
    5. Talk to a trusted lending officer or funding experts to find out exactly what their specific bank will need in the way of paperwork to eliminate having to go back and forth several times if you are missing paperwork.

  2. The first step is understanding what exactly a bank is looking for. Each financial institution has a unique set of standards but generally speaking, most banks will require you to have the following:
    1. A good business purpose. They want to know that the loan is going towards a sound prospect with a chance of succeeding (and being paid back!)
    2. Good character of the business owners. Having experience and good credit are great indicators of your integrity.
    3. The ability to pay back the loan. Collateral is important as a bank will want the loan fully secured. Having personal equity invested in the business is a good indicator that the owners will do all they can to make the business succeed and to pay back the loan because of their personal vested interest.

  3. The following are the physical documentation you will need:
    1. Credit history, both personal and business wise.
    2. Financial (projected) statements for the business.
    3. A business plan that is sound and strong. Bios and education of the owners should be included here.
    4. Personal guarantees.

  4. Small business loans can come with a lot of variety depending on the size of the actual start up business. You probably wouldn’t get any unsecured business loans at first, especially if the bank does not know you. Small business loans can be anywhere from $5,000 to $5 million. The average loan is somewhere around #370,000.

Keep in mind that this may not be easy because many banks are looking to fund growth so start ups can be particularly difficult but don’t give up. If you really believe in your business and can stand behind it, you will find someone willing to help you, even if it takes awhile. Many start ups rely on family, friends and credit cards in the beginning which is not a terrible idea, especially if you know that your business will take off and you will be able to pay everything back anyway. For more information, read this website.


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